Tough year ahead for construction cargo haulers

Jan. 1, 2008
Fleets that haul construction cargoes face a tough market in 2008. There is no way to sugarcoat that reality, and the year will be especially difficult

Fleets that haul construction cargoes face a tough market in 2008. There is no way to sugarcoat that reality, and the year will be especially difficult for the trucking companies that are most reliant on the new home construction market.

Without question, housing construction has consumed enormous quantities of building materials in recent years. Tank fleet cargoes include asphalt and gravel for roofing materials, lime, cement, concrete add mixtures, and chemicals used in insulation and adhesives.

Unfortunately, Bulk Transporter's annual construction hauling forecast report indicates much lower demand for those cargoes for the next year or two. US housing starts are projected to fall another 11.9% in 2008. The National Association of Home Builders says housing starts probably will have declined 50% from their peak in 2006 until the market begins a slow recovery in 2009.

The collapse of the housing market began with lenders and financial organizations that were heavily involved with subprime mortgages. Foreclosures on subprime, adjustable rate mortgages (made to higher risk borrowers) began to increase in the fall of 2006 and soared during 2007. Subprime mortgage foreclosures accounted for 43% of all foreclosures during the third quarter of 2007. The impact of the crisis spread across the financial sector and is being blamed for pushing the United States closer to a recession.

The potential for a recession has become a growing concern for economists. However, they believe it could be relatively short in duration — possible lasting no more than two or three quarters. Recovery could begin as early as 2009, according to some predictions.

The construction outlook isn't all gloom-and-doom, though, even with the hint of a recession. First of all, economists are predicting that commercial construction will increase, possibly by more than 2%. Values of institutional construction will rise about 4%, and school construction will increase by about 7%.

By most projections, road and bridge construction will grow by about 2%. Some regions of the United States will see more activity than others and will perform better than the national average. Highway construction activity is expected to increase across most of New England, the middle south, parts of the Midwest and Southwest, and the Rocky Mountain states.

More federal funding is being made available, which should help boost road and bridge construction. Federal funding will increase to $78 billion in 2008 from $75.5 billion in 2007, according to the American Road and Transportation Builders Association.

More federal highway funds could be on the way. The reason: Many members of Congress developed a fresh interest in infrastructure improvements following the I-35W bridge collapse in Minneapolis, Minnesota, in August 2007.

All in all, the outlook for the construction sector is pretty good in light of the financial woes that have hit the housing market. Hopefully, construction haulers have been able to take the steps necessary to minimize the effects of the slowdown.

The construction sector will turn around. It will recover. It always has before.

About the Author

Charles Wilson

Charles E. Wilson has spent 20 years covering the tank truck, tank container, and storage terminal industries throughout North, South, and Central America. He has been editor of Bulk Transporter since 1989. Prior to that, Wilson was managing editor of Bulk Transporter and Refrigerated Transporter and associate editor of Trailer/Body Builders. Before joining the three publications in Houston TX, he wrote for various food industry trade publications in other parts of the country. Wilson has a bachelor's degree in journalism from the University of Kansas and served three years in the U.S. Army.